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Hospitals on financial brink may succumb to coronavirus

KANSAS CITY, Mo. (AP) — Randy Tobler says his Missouri hospital has until mid-May before it runs out of money — that’s the rosy projection, anyway.

Tobler, chief executive of Scotland County Hospital in northeastern Missouri, told The Kansas City Star that he had about $1.7 million in cash, including emergency funds. Payroll every two weeks for the 25-bed hospital is about $400,000.

And now he faces an extraordinary health crisis that may drain the hospital’s resources.

Finances are notoriously difficult for rural hospitals in the ordinary course of business — more than 125 have closed since 2010 across the U.S., according to the Sheps Center for Hospital Services Research at the University of North Carolina.

Missouri finds itself in exclusive company: It is one of five states where 40 percent or more of its rural hospitals are deemed vulnerable, according to an analysis by the Charits Center for Rural Health.

Add the specter of a spreading coronavirus pandemic, and hospitals such as Tobler’s find themselves on the brink of financial jeopardy.

“I’m watching people who are the most resilient people in the world beginning to crumble,” Tobler said of his staff as they grapple with what’s ahead.

Thin hospital finances at rural hospitals are taking a hit, even if the pandemic hasn’t reached most outstate counties in Missouri, because regular or elective medical procedures are being canceled in anticipation of coronavirus’ arrival.

“If you talk dollars and cents, the impact of reducing elective surgeries is a huge blow to many of our facilities,” said Patrick Geschwind, interim chief executive of Pemiscot Memorial Health Systems in the Missouri Bootheel. “That’s the most lucrative part of our business, a procedure done in our hospital versus a clinic.”

If a wave of coronavirus cases hits Pemiscot County in the coming weeks after revenue streams have been cut, its financial candle burns at both ends.

“If you reduce too much of your revenue stream, that will hurt,” Geschwind said. “And then if you get an influx of all these patients 30 days out or whenever the peak might hit, you will be strained with your resources.”

Adding to worries confronting Missouri hospitals are proposed changes to the state’s Medicaid program.

A proposal by MO Healthnet, which runs Missouri’s Medicaid program, is touted as a measure to realize budget savings and simplify notoriously byzantine algorithms used to calculate reimbursements for outpatient procedures. They forecast $60 million in budget savings from the idea.

Some hospitals and lawmakers fear the changes could cut funding when hospitals can least afford it.

An analysis by the Missouri Hospital Association claims an outpatient reimbursement proposal by MO HealthNet could lower outpatient payments to Missouri hospitals by more than $100 million next fiscal year.

“It doesn’t make any sense when we are already closing hospitals in Missouri, we never expanded Medicaid, so we still have large groups of people across our state that are not having access to health care,” said state Rep. Deb Lavender, D-Kirkwood. “It just doesn’t make sense for me that we are removing that much money from hospitals.”

Todd Richardson, director of MO HealthNet, testified to lawmakers before they adjourned last week that Missouri needed to update and simplify an outdated Medicaid reimbursement system.

“We have some of the most outdated payment methodologies in the country,” Richardson said. “This is not by any stretch the only thing we think needs to happen in health care, but we do think it is a big step in rationalizing and creating a better baseline for how we’re paying for a pretty big bucket of services.”

Plus, supporters of the idea add, hospitals are set to get an influx of money from coronavirus legislation and stimulus money passed by Congress.

Another Medicaid proposal in Missouri would restrict reimbursements to hospitals for patients who come from outside the state.

From the standpoint of Missouri hospital administrators and executives, particularly in rural Missouri, the coming storm of coronavirus cases and the uncertainty about Medicaid changes pose a threat to their financial footing.

Since 2010, six rural Missouri hospitals have closed; only four states — Texas, Tennessee, Oklahoma and Georgia — have had more closures, according to the Chartis Center.

The Chartis Center analysis shows that rural hospitals in states that did not expand Medicaid, which includes Missouri, have lower median operating margins than in states that did expand Medicaid eligibility and accepted the influx of federal money that comes with it.

For the Pemiscot Memorial Health Systems, situated in one of the poorest counties in Missouri, about 10 percent of its patients are uninsured.

Geschwind, the interim chief executive for the Pemiscot hospital system, said that each month his hospital had to write off about $600,000, fees for service they can’t collect from patients who can’t pay.

“Which is an incredible sum for a hospital our size,” he said.

About 20 percent of his hospital system’s patients are on Medicaid. Expanding Medicaid, Geschwind said, would increase the number of patients eligible for Medicaid assistance.

“If we could get more Medicaid enrollees, we would at least make a dent in our uncollectables each month,” Geschwind said.

Pemiscot is hardly unique.

“No, we are not solid,” said Dan McKinney, administrator for the Hermann Area District Hospital.

All of which shows the precarious nature of rural hospital finances in Missouri without the pressure of coronavirus. Rural hospitals rely heavily on regular visits and routine procedures, such as colonoscopies, elective surgeries and lab tests, to support already skinny finances.

McKinney said his hospital in Hermann was anticipating “a huge cutback on cashflow” as patients cancel those types of ordinary visits.

Others expect the same.

“The analogy I use is going into this mess it was like a person who has just had a bad heart attack … and now you throw them on a stress treadmill and crank up the incline and the speed,” Tobler said.

Rural hospitals are also limited on how much they can help patients who come in and test positive for coronavirus. Ventilators and protective equipment are in thin supply, and rural hospitals anticipate transferring more serious cases to bigger hospitals in St. Louis, Cape Girardeau or Kansas City.

A bit of good news on the horizon for hospitals is that the $2 trillion economic stimulus bill passed by Congress last week includes more than $100 billion for hospitals.

But hospital executives in Missouri aren’t certain when the infusion will come, and whether it might be too late when it does.

“If we don’t get some kind of a big check in 30 days, by the time the peak use of our facilities with virus patients, then we’ll be bankrupt,” Geschwind said.

One thing everyone seems to agree on with Missouri’s Medicaid proposals is that some hospitals in the state will benefit while others stand to lose.

But it’s hard to guess at this point which ones will be which.

“There are hospitals that gain and those that lose,” said Dave Dillon, spokesman for the Missouri Hospital Association. “However, there are more losers than gainers.”

One proposal is to simplify a fee schedule for reimbursements to hospitals for outpatient visits. The goal, according to MO HealthNet officials, is to create standard fees for the same procedures, which currently vary from one hospital to the next.

Richardson, the director of MO HealthNet, said knee surgeries were among the most common outpatient procedures.

“We might reimburse one hospital $20,000 for that surgery, we might reimburse another hospital $4,000 for that surgery,” Richardson said. “That’s for the exact same procedure, no difference for acuity or the complexity of the cases. Just based on what the facility billed us for those services.”

The ultimate goal is to move the state towards “paying for value,” Richardson said, by creating incentives for hospitals for better patient outcomes.

“It’s very difficult to build that model off of payment methodologies that have such wide variances in what we pay for almost identical services,” he said.

He would prefer similar reimbursements for the same procedure.

“Missouri has some of the most outdated, inequitable Medicaid payment methodologies in the nation,” said Rep. Cody Smith, R-Carthage and chairman of the House Budget Committee. “MO HealthNet’s proposed Outpatient Simplified Fee Schedule is a major step in the direction of fairness and consistency to hospitals across the state.”

Lavender, the Kirkwood House Democrat who has been skeptical of Richardson’s proposal, said it failed to realize and take into account differences among hospital facilities.

“Let’s say there is a piece of medical equipment that a rural hospital has bought compared to the same equipment that BJC [the hospital system based in St. Louis] bought here in St. Louis,” Lavender said. “BJC may not have to charge as much for the machine to be used, because they will use that machine 10 times a day. The rural hospital, knowing they may only use it once a day because they don’t have the same population, so they charge more for services. That’s how they are compensated for having that machine to begin with.”

Lavender proposed an amendment to the Missouri budget that would increase funding by $37 million through the Federal Reimbursement Allowance, a medical provider tax that can draw additional federal funds to the state Medicaid system. Lavender sought the FRA funds to offset an estimated $47 million decrease in the state’s Medicaid budget, but her amendment was voted down.

Another proposal is to cut reimbursements to hospitals for treating out-of-state patients, a measure that could affect specialty hospitals such as Children’s Mercy Hospital in Kansas City or border hospitals such as Truman Medical Center, also in Kansas City.

The outpatient reimbursements are estimated to cost Truman and Children’s Mercy $25 million to $30 million, while the effects of out-of-state reimbursement changes are said to be more substantial.

But the hospitals are also getting conflicting information about the Medicaid proposals’ effects.

Geschwind said an MHA analysis shared with him showed his Pemiscot County hospital losing $200,000 from outpatient reimbursements, while another analysis by accounting firm BKD showed a $400,000 gain.

Geschwind won’t hazard a guess as to which projection is correct.

Tobler, the Scotland County Hospital chief executive, said he understood that the outpatient reimbursements change could result in an estimated $120,000 loss, with the out-of-state reimbursement proposal costing another $90,000.

“We’re just going to have to eat it if they don’t pay,” he said. “If they pull that trigger along with the COVID thing, it’s probably the last nail in the coffin.”

Missouri officials say the Federal Medicaid Assistance Percentage passed by Congress in response to the coronavirus crisis would increase federal funding to Missouri’s Medicaid program.

“The FMAP is a tool that the federal government can use to push additional resources to the state,” said Dillon, the MHA spokesman. “It fits within the state budget because Medicaid is fairly flexible by comparison to other budget categories, and the state can’t spend money that isn’t appropriated. This won’t affect reimbursement rates or total Medicaid spending. The same tool was used in the financial crisis.”

Truman Medical Center was more circumspect, suggesting that conversations were still ongoing about Medicaid changes and that the coronavirus crisis might well change the direction of those discussions.

“At that time, we were working closely with that group to create something that would mitigate the effect on Truman Medical Centers/University Health,” said Leslie Carto, a spokeswoman for Truman Medical Center. “It would be safe to assume the conversation around Medicaid outpatient payments will be vastly different as we move through and past COVID-19.”

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